File No. 817.51/322.
The American Minister to the Secretary of State.
Managua, February 4, 1912.
I have a letter from the President of Nicaragua in which he says:
A crisis even graver than the present one may result from a delay of several days in insuring a fixed rate of exchange for our paper currency. This would force many into bankruptcy, cause general misfortune and perhaps be irremediable by later legislation.
Memorials to the same effect are being received from leading business men, who complain that the bankers parties to the contract should have begun the monetary reform last November; that since December the Government has relinquished the customs receipts and allowed the interest on the loan since October, without a single dollar being received.
Two difficulties stand in the way of the currency plan, I am told by the currency experts. The first, that it would require $500,000 to reduce the rate of exchange by retiring the paper currency put into circulation since Wands’ report. The second, that as long as a currency plan might fail because of Nicaragua’s bankruptcy, the experts are against recommending one.
Heavy outgo for paying revolutionary claims and cessation of collections of customs duties by the Government have caused a deficit in the Nicaraguan budget.
The Government has therefore requested the bankers to advance the additional $500,000 under the temporary loan contract, and to allow it about $25,000 monthly from customs receipts for a short time, to tide over the crisis. The only security for such an advance would be a mortgage on the Pacific Railroad, subject to a possible prior lien.
The President of the Assembly tells me the Assembly would enact currency laws if there is not too long a delay.
I suggest that the serious nature of the crisis be urged upon the bankers.